POWERED BY MOMENTUM MEDIA
(Feb-2005): Looking back to move forward
The chairman of the Australian Prudential Regulation Authority (APRA), John Laker has nominated inadequate staffing as being one of the reasons the regulator found itself so badly exposed following the collapse of HIH Insurance.
However, Mr Laker told a conference late last year that increased Government and industry funding had seen APRA rebuilding both its numbers and its expertise.
However, the chairman has warned that the regulator’s efforts are being made harder by the heavy demand for people with strong risk management skills, some of whom are being lured away from APRA.
The APRA chairman acknowledged that the collapse of HIH had represented a real setback for the organisation.
“The failure of HIH Insurance, one of Australia’s largest general insurance companies, obviously knocked APRA off its stride,” he said. “The fallout from this failure was a loss of community confidence in the prudential regulator, a considerable distraction of attention from the very good, even path-breaking, work APRA had been doing in other areas and, in the end, a change in its governance structure.”
Laker said that within APRA itself, the failure of HIH led to considerable soul-searching about how the agency carried out its supervisory responsibilities and the adequacy of its resources.
“That soul-searching was given strong direction by the report of the HIH Royal Commission,” he said. “It was also guided by other analysis undertaken at APRA’s own initiative.”
Laker said this analysis had included an earlier and very frank report on APRA’s performance by the former head of Canada’s Office of the Superintendent of Financial Institutions, and an independent benchmarking of APRA’s resources and supervisory intensity against its international regulatory peers.
“Our rebuilding strategy in the wake of HIH has been aimed at restoring confidence in APRA as a vigilant, vigorous and effective prudential regulator,” Laker said. “The words of the HIH Royal Commission that APRA become ‘more sceptical, questioning and, where necessary, aggressive in its approach to prudential supervision are seared into our consciousness, and we have been translating them into action, in a number of ways.”
He said that the main elements of APRA’s rebuilding strategy had been staffing.
“APRA’s strength and effectiveness as a prudential regulator depend fundamentally on its staff,” Laker said.
“It is their skills, judgment and intuition which makes the difference between successful early intervention and arriving late at the scene to clean up,” he said. “It is our staff who make the hard calls and who deal regularly with — and occasionally have to confront — the boards and senior management of our regulated institutions.
“And, put starkly, we just did not have enough staff,” Laker said.
“When APRA was established, around 550 staff were engaged in prudential supervision and associated corporate functions in the 11 predecessor agencies. Integrated regulation was expected to produce an ‘efficiency dividend’, particularly in corporate functions, and it did,” he said.
However, Laker said integration also saw APRA lose valuable and experienced staff in front-line supervision and specialist risk areas.
He said that by the time of HIH’s collapse, APRA staff numbers were below 400 and APRA was being stretched too thin.
Laker said the messages APRA had taken from the HIH Royal Commission had been strong ones.
“Over the past 18 months, with Government support and industry funding, APRA has been building up its supervisory resources and skills,” he said. “We have been actively recruiting for front-line supervision positions and for specialist staff with detailed knowledge of specific risk, industry or technical issues.”
He said this had resulted in the recruitment of a number of high calibre new staff, with extensive and relevant experience in industry and the professions.
However, Laker said APRA’s recruiting drive was far from over and had in fact been undermined by the strong demand for risk management specialists in Australia.
“The market for risk management specialists in Australia is running very strong at the moment, not surprising given the heightened focus on risk and governance issues,” he said. “We are losing good staff to this same market, a compliment to our skill levels but one that I would prefer not to accept!”
AUTHOR
Mike Taylor
Recommended for you
Australian super funds have delivered mixed results in the latest global rankings, with industry funds climbing, while government schemes fell sharply.
The Future Fund posted a $27.4 billion increase in value to $252.3 billion, driven by strong equity markets, resilient private market investments, and strategic portfolio shifts to anticipate changing global trading conditions.
The fund has introduced new portal features for advisers, streamlining administration and enabling quicker, more convenient client authorisations online.
APRA-regulated funds have reportedly raised concerns with the government over Division 296, as news of potential policy tweaks makes headlines.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
76.97 3 y p.a(%)
2
Global X 21Shares Bitcoin ETF
76.46 3 y p.a(%)
3
UBS Solactive Global Pure Gold Miners UCITS ETF Dis USD
51.13 3 y p.a(%)
4
Global X GlobalX FANG+ ETF
45.15 3 y p.a(%)
5
Select Baker steel Gold Institutional
43.78 3 y p.a(%)
